Saudi Oil Minister Ali al-Naimi said OPEC should raise production quotas by more than 2 million barrels per day from existing limits of 23.5 million barrels daily.

"The recent revisions in oil demand and supply projections for the coming months point to an increase in required production from OPEC by an excess of two million barrels per day," Naimi said in a statement given to reporters in Amsterdam.

"Saudi Arabia will propose an increase in OPEC's production ceiling by more than two million barrels per day and has already allocated its customers around nine million barrels per day as of June 2004," the statement said.

Oil prices fell after the statement, slipping briefly below $40 for U.S. crude which by 1710 GMT was off 65 cents on the day at $40.15 a barrel.

A Saudi delegate said the nine million bpd figure was not entirely for export and included oil used domestically for Saudi refineries.

OPEC meets informally in Amsterdam on Saturday ahead of a conference with oil consuming nations.

OPEC's most influential member, Saudi Arabia holds the only significant volumes of spare capacity in the 11-member group.